- Category: Corruption
- Published on Tuesday, 24 April 2012 15:13
- Written by Yinka Odumakin
- Hits: 537
"Troubled Budget Management: A core role of the Federal Ministry of Finance is to manage the budget of the Federal Government and to manage, control and monitor federal revenues and expenditures. With regard to the subsidy scheme that had provision for N245.96b in year 2011, the sum of N2,587.087b (as at December 2011, and excluding possible out standings payable in 2012) was actually expended, including the double deductions by NNPC. This is certainly a record that can hardly be rivalled in the history of a warped budget management of any nation anywhere in the world."
FEDERAL MINISTRY OF FINANCE (FMF) FINDINGS:
1. Acquiescence to direct deductions by NNPC: The Ministry was fully aware of NNPC’s practice of making subsidy payments as a first-line charge before revenue was shared among the three tiers of government. Successive Appropriation Acts have always made provisions specifically to defray the costs associated with cash calls on joint ventures as a first line charge. Thus, direct deductions by NNPC relating to joint venture cash calls are provided for in the budget. This is because Section 7(4)(b) of NNPC Act Cap N123 LFN 2004 provides for defraying of expenses incurred in making money for the country.
However, under-recovery (payment of subsidy) cannot be said to be “making money for the country” and so is not covered by this Act.
The direct deductions by the NNPC are a clear breach of Section 162 of the Constitution of the Federal Republic of Nigeria (as amended).
2. Troubled Budget Management: A core role of the FMF is to manage the budget of the Federal Government and to manage, control and monitor federal revenues and expenditures. With regard to the subsidy scheme that had provision for N245.96 Billion in year 2011, the sum of N2, 587.087 Trillion (as at December 2011, and excluding possible out standings payable in 2012) was actually expended, including the double deductions by NNPC. This is certainly a record that can hardly be rivalled in the history of a warped budget management of any nation anywhere in the world.
The explanation of budgetary under-provision “based on an expectation that deregulation would be done in late 2010” as explained by the Director-General
Budget Office, or “based on assurances that deregulation would take effect in first quarter of 2011”, as explained by the Hon. Minister of Petroleum Resources, was not only contradictory but also an after-thought. The time limitation was not expressed or implied in the Appropriation Act of 2011. Furthermore, the Appropriation Act of 2011 was amended in May of the same year and there was no request from the Executive for increase in the subsidy figures.
3. Outsourcing the Ministry‟s Responsibilities: Apparently due to deficit of faith in ability or integrity of its staff, the FMF outsourced its responsibility of witnessing and confirming imported products to the accounting and audit firms of Akintola Williams Deloitte in 2006, and Olusola Adekanola and Co. in 2011. Staff of the firms appended their signatures on every document submitted by marketers to process their claims. PPPRA testified that the reliance it placed on the signatures was weighty, as it normally forwarded marketers’ claims for payment to FMF once certified by the firms. Reliance on statements of the two firms was foundational, as all other agencies, including the Ministry of Finance, Office of the Accountant-General of the Federation and the CBN, all relied on PPPRA’s certification. Obviously, the FMF also treated confirmation by the two firms as unassailable as it never queried its quarterly audit reports even in the face of rapid and meteoric escalation of subsidy claims.
However, we observed that the firms contributed little value to the veracity of the exercise. Indeed during interaction with the Committee, it became obvious that the firms had neither adequate knowledge of procedure of measuring products in a vessel before and after discharge nor did they demonstrate professional care expected of their standing in auditing marketers’ claims based on quantity, exchange rate and crude price. This care-free attitude could hardly be explained beyond an interest of participating in a bazaar and collecting N275,000.00 per vessel. Surprisingly, the loophole of non-availability of reliable data on quantity of imported products or any other relevant information could not be salvaged by these firms.
There was no evidence that due process was followed in the process of their appointment as Consultants.
Blanket approval for NNPC to deduct subsidy payments to itself as a first line charge is illegal as there was neither appropriation before the deductions nor supervision on the expenditure.
The practice of direct deduction without an Act of the National Assembly, however long it has been practised, has no legal foundation. This resulted in various ministries and agencies associated with the payments (FMF, FMPNR, Budget Office, Office of Accountant General of the Federation, CBN, NNPPC, PPPRA) providing conflicting figures on the amount deducted.
Depletion of shares of states and local governments due to reduction in distributable pool after uncontrolled deduction by NNPC.
c. An estimated N2,587.087 Trillion inclusive of N847.942 that was withdrawn by NNPC from the domestic crude account was spent on subsidy in 2011 compared to 245Billion approved in the Appropriation Act of the same year; an increase of well over 900%
d. This 900% extra-budgetary expenditure was unconstitutional and was a clear breach of Section 162 of the 1999 Constitution (as amended); and the Federal Ministry of Finance, Director-General Budget Office and Accountant-General of the Federation should be held responsible.
1.The services of the accounting firm of Akintola Williams, Deloitte and Olusola Adekanola & Partners should be discontinued with immediate effect for professional incompetence.
2.In view of the above recommendation the two firms should be blacklisted from being engaged by any Federal Ministry, Department or Agency (MDA’s) for a period of three years.
3.All those involved in the Federal Ministry of Finance, Director-General Budget Office, and the Office of the Accountant General of the Federation in the extra budgetary expenditure under the PSF Scheme (2009-2011) should be sanctioned in accordance with the Civil Service Rules and the Code of Conduct Bureau.
4.The National Assembly should enact an Act to criminalise extra budgetary expenditure.
5.The Federal Ministry of Finance should allow the Nigerian Customs Service to carry out its statutory functions (as efficiently as possible) on imports of petroleum products.